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Auto Buying 101

For many people, buying a car is one of the first big purchases they make. If you haven’t bought a car before, the process can be quite overwhelming. We asked our Consumer Loan Officer and Watertown Branch Manager, Eric, to walk us through the basics of auto buying. Keep reading or click below to watch!

The Different Parts of a Loan

Before we dive into the loan process, let’s talk about the different parts of the loan. The principal amount, the down payment, the interest, and the term.

The principal is the initial amount that you borrow. If you’re borrowing $20,000 to buy the vehicle, the principal amount is $20,000. How quickly you can pay it off and how much you end up paying in the long run is based on a few different factors. The down payment is how much money you’ll pay upfront for your loan. Most lenders will have a required percentage of the total vehicle cost that you are required to pay. You can speak to your local loan officer to find out how much that will be.

Interest is the cost to borrow money. When we take out a loan, we agree to pay it back plus interest for the convenience for having the full amount at the time of the car purchase. The interest rate determines how much total interest you will pay over the life of the loan. The length of the loan, or the amount of time you have you have agreed to pay off the loan is called the term.

Remember, you’re monthly payment is a minimum to be made. When you pay more than the minimum, you help cut down on the principal amount. This means that interest will accrue on a smaller amount, so you will have less interest to pay overtime.

Where to Start?

Now that we have the definitions in order. Let’s talk about where you should start when you’re in the market for a new vehicle. It’s natural to think about what kind of car you would like to drive first, but before that, think about how much you want your monthly payment to be and how much you will be able to afford for a down payment.

You want to make sure that you’re auto loan payment fits comfortably within your budget. It’s also a good idea to talk to your insurance agent about the insurance costs, so the vehicle does not become unaffordable for you.

Next, it’s a good idea to get preapproved at your financial institution like FCCU. Our loan officers can help you make sure that you’re payments will be affordable, and they can answer any other questions that you may have. Getting preapproved helps you secure the best interest rates possible and will give you stronger negotiating power when you are making the purchase.

If you are buying from a dealer, it is a good idea to look over the inventory before you go. That way, you can schedule appointments to drive a few specific vehicles. This helps the dealer know what you are looking for in a car and helps you stay focused instead of trying to narrow down their entire inventory. Remember, this is your purchase. If you are  not finding the vehicle you want, you can always walk away from the deal to find the right vehicle for you.

Click here to view a list of local auto dealers that we trust and recommend.

If you are buying from a private seller, you want to make sure there is not a lien on the vehicle. A lien is a legal claim to an asset that allows the holder to acquire it if the debts are not paid. This means that if someone has not been making their auto payments for a while, the lender may have legal ownership of the vehicle that they are trying to sell. If there is a lien on the title, you will need to get a payoff letter from the lender to make sure that you get a clear title when you make the purchase. If you have the vehicles VIN or vehicle identification number, you can check to see if it is lien free at

Reviewing the Loan Documents

Finally, look over the loan documents before you sign them, and make sure you know what they mean.

If you are buying a new car, it will come with a warranty. If you are buying a used car, it may still be covered by the original warranty depending on the mileage and the time since the original sale. There are two types of warranties. One that tells you what is covered, and the other that tells you what is not covered. Make sure you understand what is included in your warranty, and don’t be afraid to ask questions.

GAP insurance is an option that can protect you if you are in an accident and your vehicle is a total loss. Meaning that the cost of repairs would actually be more expensive than the total value of the vehicle. If your insurance policy does not cover the entire cost of what you still owe on the loan, GAP insurance will cover the cost for you.

And that’s everything you need to know to get started to make your vehicle purchase. At any point in your auto buying journey, feel free to give us a call at 920-563-7305 to speak with one of our loan officers, or click here to apply online today! There is a lot to know when it comes to this topic, but our loan officers are extremely knowledgeable and are happy to help you find the right vehicle.

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